Regulating Trading Practices

Andreas M. Fleckner

Max Planck Institute for Comparative and International Private Law

August 6, 2014

The Oxford Handbook of Financial Regulation, Oxford University Press, Forthcoming

High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today’s regulatory challenges. Thanks to a steady stream of news reports, investor complaints and public investigations, calls for the government to intervene and impose order have become commonplace, both in financial and academic circles. The regulation of trading practices, one of the oldest roots of securities law and still a regulatory mystery to many people, is suddenly the talk of the town. From a historical and comparative perspective, however, many of the recent developments look less dramatic than some observers believe. This is the quintessence of the present chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyzes the rules, regulators and techniques of the world’s leading jurisdictions. The chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.

Number of Pages in PDF File: 52

Keywords: securities trading, standardization, self-regulation, state intervention, price formation, price discovery, market efficiency, financial stability, investor pro-tection, algorithmic trading, short selling, market fragmentation

JEL Classification: D4, D53, F3, G1, G18, G2, G23, G24, G28, H1, K2, K22, L1, L5, N2, N20, N4, N40

Accepted Paper Series

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Date posted: August 8, 2014 ; Last revised: November 15, 2014

Suggested Citation

Fleckner, Andreas M., Regulating Trading Practices (August 6, 2014). The Oxford Handbook of Financial Regulation, Oxford University Press, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2476950

Contact Information

Andreas M. Fleckner (Contact Author)
Max Planck Institute for Comparative and International Private Law ( email )
Mittelweg 187
D-20148 Hamburg
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